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Bernanke acknowledges credit market concerns

Ben Bernanke acknowledged credit concerns were spreading beyond the sub-prime mortgage market as investors showed their worries with a flight to quality, seeking refuge in government bonds and other safe assets.

Although the Federal Reserve chairman played down the likely effect on the US economy, declaring that financial conditions remained â€œgenerally favourableâ€?, he said the Fed had trimmed its central tendency forecasts for growth this year and next, but made no change to its forecasts for inflation.

The reduction in the Fedâ€™s growth forecasts reflect a more protracted drag from housing investment, as well as a weak first quarter. They suggest that the Fed now thinks the economy is unlikely to return to its trend rate of growth until some time next year.